In Guernsey, employers have a legal obligation to make social security contributions on behalf of their employees. The current employer contribution rate is 6.90% of an employee's gross earnings, up to a monthly earnings limit. These contributions fund various benefits, including state pensions, sickness benefits, and long-term care insurance.

Withholding and Payment

Employers are also responsible for withholding the employee's share of social security contributions, which is currently set at 6.60% of their salary. Both the employer's and the employee's contributions must be remitted to the Social Security department, usually via online submission.

Other Employer Obligations

Employers are required to register with the Guernsey Revenue Service. Upon registration, they will be given two reference numbers - one for tax and one for contribution deductions. These numbers should be used when contacting the Revenue Service and using the Returns Creator.

Furthermore, employers must maintain accurate payroll records for tax and audit purposes. These records are crucial for ensuring compliance with tax laws and for providing necessary documentation in the event of an audit.

In Guernsey, the standard income tax rate is 20%. This tax is withheld directly from employee salaries through a Pay-As-You-Earn (PAYE) system administered by their employer and remitted to the Guernsey Revenue Service. Employees are also granted personal tax allowances which reduce their taxable income.

Social Security Contributions

Employees in Guernsey contribute to social security at a rate of 6.60% of their gross earnings. This amount is capped at a monthly limit. The employee's share of social security contributions is withheld directly from their salary by their employer.

Tax Returns

Individuals are generally required to file an annual tax return with the Guernsey Revenue Service to calculate their final income tax liability. This process helps to ensure that the correct amount of tax has been paid and any over or underpayment can be rectified.

Guernsey does not operate a Value-Added Tax (VAT) system. Instead, it has a form of import duty that applies in certain situations.

Goods and Services Tax (GST)

Guernsey imposes the Goods and Services Tax (GST) on the importation of certain goods into the island. In limited cases, GST may also apply to the importation of services where those services are deemed related to goods physically brought into Guernsey.

VAT Considerations for Businesses

Although Guernsey does not have VAT, businesses providing services to clients in other jurisdictions should consider the VAT implications in those relevant countries. This is particularly important for businesses providing services to clients within the European Union (EU), where VAT registration and compliance may be necessary.

Guernsey offers a generally favorable tax environment with key features such as a zero corporate tax rate for most companies. Certain businesses, such as financial services companies, utilities, and income from Guernsey property, may be subject to income tax at a rate of 10% or 20%.

Absence of Other Major Taxes

Guernsey does not impose capital gains tax, sales tax, or inheritance tax.

Specific Incentives

Programs may be available to assist with relocation costs or provide tax concessions for businesses moving to Guernsey, particularly in high-value sectors. These are usually assessed on a case-by-case basis.

Other Considerations

While not traditional tax incentives, Guernsey's unique tax system offers indirect benefits. The lack of VAT and complex corporate tax structures can reduce administrative burdens for businesses operating within the island. Additionally, Guernsey's tax structure can be advantageous for establishing holding companies or intellectual property operations.